CUSOs Take Different Paths to Success

Credit Union Service Organizations (CUSOs) continue to increase their role in the credit union system. The number of CUSOs profiled in this Guide totals 681, including 546 wholly-owned and 135 multi-owned. These businesses serve credit unions and their members by providing improved operational efficiencies through data processing solutions, greater market coverage through shared branch and ATM networks, wider product offerings through credit card, auto and mortgage lending programs, and complete member financial planning solutions through insurance, investment and trust services. In short, they have become a critical component of many credit unions' efforts to become the primary financial institution for their members.

 
 

Credit Union Service Organizations (CUSOs) continue to increase their role in the credit union system. The number of CUSOs profiled in this Guide totals 681, including 546 wholly-owned and 135 multi-owned. These businesses serve credit unions and their members by providing improved operational efficiencies through data processing solutions, greater market coverage through shared branch and ATM networks, wider product offerings through credit card, auto and mortgage lending programs, and complete member financial planning solutions through insurance, investment and trust services. In short, they have become a critical component of many credit unions' efforts to become the primary financial institution for their members.

In the last year, there have been a number of developments that indicate the growing role of CUSOs. Many of these are a reflection of the cooperative nature of credit unions and the success that can be achieved through collaborative effort. A few of the key trends that underlined the progress last year include:

  • Single state to multi state organizations - The largest credit union-owned ATM network was enhanced through the combination of CO-OP Network and Service Centers Corporation. The resulting network will serve 1,150 credit unions and 10 million credit union members with over 12,000 ATMs. Each of these organizations evolved from a small group of credit unions in a single state into a nationwide cooperative effort that encompass 49 states plus the District of Columbia and Puerto Rico.

  • Single owner to multiple owners - XCU Capital Corporation, Is a CUSO that has transformed itself from an organization wholly owned by Xerox Federal Credit Union into one owned by multiple credit unions.. To fully realize the vision of XCU Capital, its board understood that additional credit union partners were needed beyond Xerox FCU. The partnership now involves credit unions in California, Utah and North Carolina, each bringing capital and energy to further their idea of a credit union-owned broker/dealer. The addition of WesCorp, the largest corporate credit union in the country, to the partnership highlights the increasing role of corporate credit unions in developing credit union-led business initiatives.

  • Cross-state ownership - Riverside County's Credit Union in California is teaming with two Michigan-based credit unions, First Resource FCU and United FCU, to form a CUSO focused on realizing operational scale in key functions such as auto brokerage, insurance and mortgage services. The business is building on the idea that credit unions can achieve greater efficiencies, economies of scale and revenue streams through cooperation, not just mergers. With geographically disbursed operations in seven states and diverse membership bases, this combination of credit unions lessens the risk of a downturn in specific industries or areas of the country which could slow the CUSO's growth.

  • New product offerings - Some credit unions have taken advantage of the expanded CUSO authority to bring new products to their members. One example is a debt cancellation product that a number of credit unions have begun to offer to their members through their participation in Member Gateways, a multi-owned CUSO. The ability to provide a broad, innovative set of products to members is critical to the continuing growth and development of the credit union industry.

These examples highlight the diverse strategic directions taken by CUSO management, yet all share the common goal of serving their members more effectively, efficiently and comprehensively. They also demonstrate that while many wholly owned CUSOs are succeeding, more credit unions are realizing that even in small numbers they can achieve greater results than individual organizations can realize on their own. For credit unions to expand their four percent share of the U.S. financial services market, the cooperative structure must be extended beyond member-owned cooperatives to credit union-owned, business-to-business cooperatives such as these. It is our hope that readers will use this Guide to share their approaches to these businesses with their peers so that their CUSOs and credit unions can further enhance their role in their members' lives.


 

 

 

April 22, 2002


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